“Expanding College Access in Taiwan, 1978 – 2014: Effects on Graduate Quality and Income Inequality”

Shao-Hsun Keng, National University of Kaohsiung

Chun-Hung Lin, Tamkang University

Peter F. Orazem, Iowa State University

Between 1990 and 2014, Taiwan increased the college share of its labor force from 7% to 28% by converting junior colleges to 4-year colleges.  Such a rapid surge in skill supply should suppress college wages and lower wage income inequality.  Instead, wage inequality rose 7% since 1978. We show that the surge of weaker college graduates made them poor substitutes for better-trained college graduates and led to an increase in wage inequality within skill groups. The college premium would have been 54% higher had college quality remained unchanged at its 1990 level.  Rising wage inequality due to increased variation in the quality of young college graduates added another source of inequality to the Taiwan labor market.  The Taiwan case shows that increasing college access alone will not lower inequality.